Fiat and General Motors announce an alliance
Fiat and General Motors announce an alliance
TURIN (Reuters): Italy's Fiat and the world's top carmaker General Motors on Monday unveiled an alliance backed with cross- shareholdings in a bid to keep abreast of the wave of global consolidation.
The deal, elbowing aside a bid for Italy's industrial dynasty from DaimlerChrysler, calls for joint ventures in engines and components and especially targets the markets where both carmakers operate, Europe and Latin America.
The two carmakers expect to save up to US$2 billion a year from the alliance.
Under the accord, GM will acquire a 20 percent stake in Fiat Auto in exchange for $2.4 billion in GM common stock. Fiat will take a stake of some 5.1 percent in the Detroit giant, becoming one of its largest single shareholders.
"Automaking today is truly a global affair," GM Chairman and CEO John Smith told a news conference at the historic Turin headquarters where Fiat last year celebrated its centenary.
"The challenges are great but the opportunities are almost timeless and limitless," Smith said.
Fiat Chairman Paolo Fresco told the news conference, beamed live to GM's headquarters in Detroit, the deal would enable Fiat's recently loss-making car division to compete better.
"We are offering our shareholders further confirmation of the fact we want to grow and keep our fate, our destiny, under control," Fresco said.
Industry sources said the deal hammered out on Sunday night followed what was effectively an "auction," carried out in secret over several months and pitting GM against DaimlerChrysler and BMW, among others.
DaimlerChrysler had offered to buy Fiat Auto outright in shares and cash. But the Agnelli family, headed by patriarch Gianni who turned 79 on Sunday, had battled to maintain control of one of Europe's most prominent family-held empires.
"The two conditions we set were to have as strong an ally as possible and independence," Agnelli told RAI television.
The deal includes a crucial clause allowing Fiat to sell the remaining 80 percent of Fiat Auto to GM at "fair market value" by the end of the decade -- a form of "parachute" offering a way out if the auto industry flounders. And one which industry sources said had persuaded the Agnelli family to back GM.